tv [untitled] September 25, 2012 3:30pm-4:00pm PDT
responsibility for maintaining our assets. that they have painstakingly adhered to a goal, a program that we have, the ten-year capital infrastructure plan. because every year and every other year we go out to the public and say to them as we do with our parks bond and as we do with our other bonds and we have done with our general hospital, no matter how big it is and no matter how important it is, we will keep it responsiblely under your property taxes and we will deliver these projects on-time and within budget. and to-date, all of the 2008 parks bonds projects are all underbudget and the $195 million parks bond will in and of itself create in some 1300 jobs. ladies and gentlemen, we can't move backwards. we can't rest. we have got to move forward. so something that i hope you
wouldn't have seen on the november ballot was a move to tear down our hetch hetchy and i have said it time and time again, this is a dangerous and misguided effort that will cause disaster for our economy and for our environment. so that is why it's been labeled "prop f." [ [ laughter ] [ applause ] so please make sure that you help us to defeat that some people are suggesting that we can tear down our hetch hetchy dam and get enough water for our businesses and residents and i tell you there is absolutely no way. that is all that is on ballot and let's look forward to what we're doing on our major development projects. as mentioned by joan earlier, four cities, 5m will preserve the iconic chronicle building,
convert four acres of underutilized parking lots and industrial structures into an urban mixed-use campus. thank you, alexa arenas for taking this ground breaking project and making sure that the innovative companies that are the life blood of our city are taken care and thank you very much for joining us this morning. [ applause ] the moscone expansion project "[ys3xconventi center remains the linchpin of our city's tourism and thank you for working with us. along the waterfront, mixed use developments are being planned at seawall lot 337 and pier 70, which will create vibrant neighborhoods. and in less than five years, we're going to be welcoming the
golden state warriors here, back to san francisco! [ applause ] i want to thank joe and peter for their vision and i want to especially thank the leadership of rick, who is here today at our table for helping us convert a derelict pier that has had so many struggles and help us transform that into an iconic facility that will bring thousands of people out and i want to thank supervisor kim and i think in the audience today, i understand the head of our community advisory committee, katie ladelle is with us. thank you, because there is no rest for you. [ laughter ] [ applause ] >> the end game is to connect with everybody who is impacted, because that is what the warriors want. they want the whole city
excited about the idea. i am excited about it and we'll get it done rick, because it's the greatest thing for our city. working together we're developing area plans that will shape the city for years to come. from the transit center district plan anchored by the new transbay center, which will provide space for 27,000 new jobs, 4,000 new housing units, a thousand new hotel rooms and 12 acres of new open space. to the central corridor plan, which will enable south of market tech hub and create jobs for up to 30,000 new jobs and 10,000 new housing units. we are diligent and creatively planning for the jobs of the future. but we must executive these plans consistent with the city's values. we'll need to make sure all the businesses and commercial districts are places where we're welcoming everyone to live, to work, to shop, to eat
and to play. and we need to make sure that they are pleasant, they are walk able and they are active around-the-clock and that they are green. and then we need to roll up our sleeves and simply get it done. take these bold plans imbued by the city's values and make it happen. i want to spend the rest of the time this morning with you to take a step back and look at the amazing transformation that is underway in mid-market. you know last april we passed a payroll tax exclusion to encourage twitter and other companies to take a second look at this neighborhood. and look at what we have accomplished today. eight technology companis have occupied or leased or purchased more than 800,000 square feet.
3300 residential units under construction in and around mid-mark. five new performance and gallery venues opened up the last year, with four more in the pipeline including atr's renovation of the strand theater into a 300-seat theater. eight new small businesses opened in the past year, as well as two expansions of existing storefront businesses, and more is on the way. let's take a walk down the street, because it's kind of hard to see until you really walk it yourself. that is why today i want to walk with you through central market block-by-block and talk to you about what is really underway. so let's start here. on our tour at 5th street, with city place, which has an apt and very appropriately new name. it is called market street
place. the project will become 260,000 square foot retail center, which we expect to break ground next year. across the street, 950 market is a conceptual project, a collaboration of non-profit organizations, and art groups and funders to create a mixed-use project. this is a critical part of market street, which must be developed and occupied by uses that will be active, vibrant and community-friendly. down the block at 989 market was the first building to be occupied by a tech company last year and just last month they were joined by zeus, the romantic social network that i know all of you who are single in this rooms have used [ laughter ] and i suspect some of you who
aren't single may have used it as well. [ laughter ] zeus started in 2007 with just a handful of enterprising engineers and they grew and grew until they realized they were out of space and had to move. i'm pleased to be joined by the ceo of zeus. thank you very much for being here. [ applause ] they will set you up if they want to come down. today zeus has 125 employees and they are looking to hire another 20. zeus is truly a san francisco start-stay-and-grow story. thank you for your support of san francisco. you will find dotty's cafe and, by the way, when dotty's opened
up, they were half the size they are today. now they are opened up and they are twice the amount of size and you still can't get in without standing along the alley way and waiting for your turn. that is wonderful. and machine coffee was able to open as more employees come to the neighborhood. at the corner of jones, the majestic bank will move forward with the next few months and you have seen that construction fence around it. and you think nothing is happening in there. there has been a lot happening and i'm very, very excited to help reopen that in very short time. two projects are fostering
tourism in san francisco. they are on central market the old grant building and the renoir hotel. you have to know for the grant building, when i first started my job in san francisco government, i was at the human rights commission. we were housed in that old grant building. so i know how that feels, and time has come around because many of you know that my campaign office was on mid-market and it's a constant reminder to me this is a place to invest. with the two other projects fostering tourism on central market is the old grant building and the renoir hotel. the grant building was purchased a few years ago and is undergoing renovation to create an upscale youth hostel. and here we are between 7th and 8th, the renoir hotel was recently purchased by the core group, who is planning a major upgrade to the building and
meantime while this upgrade is going on, the new ownership has activated the storefronts. taking up the majority of the block, trinity place is the most ambitious project in the area. currently in phase 2 of a 1900-units housing development. and you can see the construction whether from 8th and market or 8th and mission that construction is going on. between 8th and 9th, you are bond to see a hard hat or two. in june, dolby purchased the old state compensation fund building for their new headquarters and space, which can accommodate a thousand employees. they are underconstruction now. across the street from dolby, the large and long inactive federal building on the u.n.
plaza is undergoing renovation and will be opened next year, bringing 600 jobs to the area. proving that central market can be a place to live, to work and to play. i recently helped to break ground for a new housing development at 55 9th street, literally right behind the dolby building. avalon bay will construct 273 units providing needed housing for people who want to live in a vibrant and active neighborhood. this part of central market is also seeing many of the existing small businesses flourish. jeannie kim of sam's diners is here with us today and she has been serving home cooking food on central market for over 30 years. the buzz in the neighborhood inspired jeannie to give her restaurant a facelift on our own dime and introduced newcomers to the neighborhood staple. jeannie is here today and stand up, jeannie.
i want to thank you and everybody take a trip to sam's diner on markets street. [ applause ] and down the street from sam's is phillip's marvelous coffee shop. it's a mecca for coffee aficionados and i know it was opened in anticipation of the twitter neighborhood and you will see tables full of twitter employees. thank you phillip for your investment and your confidence in our city. so i think you have heard, all of you, that twitter moved into the neighborhood. well, they moved in to the market square building this summer. if you ever get a chance, get to the rooftop. i don't know what connections people might have with twitter, just tell them you are a twitter and you can tweet, but i have to get to the rooftop,
because if you get up there you will see an iconic view of the city's dome a wonderful city. they are being joined by others and has an ambitious team for the ground floor that includes retail, restaurants and even a grocery store to serve the neighborhood. they are already working on the building behind it on stevenson alley. and across 10th street, crescent heights the big tower is going up as we speak, 750 units of housing for folks who want to move in, beginning late 2013. the emerald fund is also adding 399 units with their project on 100 van ness, transforming what used to be the triple a office building through the interior and facade roimprovements into housing. ladies and gentlemen, the
people sitting with me today and many of you in the room believe as i do that the best days of central market are yet to come. this is the story of san francisco, a city of innovators, entrepreneurs, risk-takers and doing who look together and work together to make it happen. this is what san francisco is about. this is why i don't get any rest. this is why you don't want get any rest. we want to continue making san francisco the best city in the world. thank you very much for working with all of us. [ applause ] >> thank you mayor lee. what a great tour. i think everybody who hasn't, get out and do this on foot and you can really see the dramatic
difference. so now let's take a look at the office market and maybe a little at residential and there is actually an office building underway. tishman spire is the person who will tell us about. so quickly carl is responsible for the portfolio in the san francisco bay area, which is really the whole garet greater bay area and was closely involved in two signature projects over seeing the development of the infinity, 650-unit condominium project and 555 mission, which is the 55,000 square feet building already bottle. and now tishman spire has
started construction on the fourth and final building, and the company has two more projects lined up. another 650 units of residential towers at 201 folsom and other office tower at 222 2nd street. so to give us his perspective on the market and the future, please welcome carl shannon. [ applause ] >> good morning. thank you mary. what an amazing opportunity to be here.
today i live here with my family and raising two young daughters in san francisco.uf for those who don't know me, i am not a religious person. but i think we should all take a moment and say a prayer of thanks for the environment we live in. for all of us who touch bay area real estate, it's really incredible how quickly things have changed. if you go back two, two and a half years and think about what the environment was in the middle of 2010, we were in a terrible environment. values were down significantly. we couldn't lease space it save ourselves and we felt it would be a long, long slug to come out of the hole we were in. here we are, barely two years later, in one of the strongest office markets in the country.
the growth for is overwhelming a shrinking of real estate needs and we're not seeing that kind of growth in new york or washington. it's very select markets that we're seeing the kind of growth that you are seeing in san francisco. so we all should be grateful that we work in this very unique and interesting environment. i am also grateful to jerry and rob speyer for driving this company that can take on and capitalize projects. there are few companies able to
do this. i feel very lucky to be part of such a strong and wonderful team and to work with my colleagues here in san francisco. i have to talk first today about what we see going on and then i'm going to talk a little bit about how we at tishman speyer want to capitalize on that. i'm going to start at the risk of boring everyone with a couple of charts. the first chart shows the average sales prices for office buildings in blue. it shows the average replacement costs in green and the line is the cap rates for office product in san francisco. and there are a couple of things that i think are worth pointing out in this chart. first, that while values have increased, they still fall short of the peaks that we saw in 2007. also while replacement costs have been fairly steady here in
the last several years, if you look back historically, there has been a stair-stepping historically over time of replacement costs. and i believe that we're about to enter an environment where both construction costs and land costs will push replacement costs up again in san francisco. also while cap rates have come down significantly since 2010, they are still well above where they were in the 2006-2007 environment. and keep in mind that the treasury market is significantly tighter today. bond rates have tighter today. and so those yields, while they have come down significantly, still offer attractive returns over fixed income securities. the second chart shows rents and
vacancy showing rents in nominal dollars. i think one of the most important things is that while we have seen a run up in rents that rents have basically come back to the 2007 levels, but well short of the rents that we saw back in 2000-2001. this is in nominal dollars and if you remember, can we go backwards? no, we can't go backwards. can we go backwards? i want to go backwards. the replacement costs back in the 2001-2000 timeframe is much lower than what it is today. so in that environment, when replacement costs were lower, we were able to support these higher rents. today, with these higher
replacement costs, i think there is significant room for rents to run. two important things that i think are going on sort of the soft side of real estate. one is that the electronic storage documents means that office space is much smaller. also in this generation, the amount of office space needed per employee has declined as densities increase. so gone are the file cabinets, gone are the wall libraries, but so too are gone are the private offices. today all of the buzzwords are about benching and collaborative space. as an example, we were able to draw major accounting consultant firm into 555 mission. that tenant went from 290,000 square feet to 190,000 square feet without laying anybody
off. so they are able to shrink their space by a third, without losing any jobs. part of that is technology. part of that is the efficiency of the building. part of is it is hoteling, but if you think about their traditional tenants and all the tenants in america get smaller by 30% without firing anybody, we wouldn't have to build any office buildinged for a long period of time. so what is remarkable about what is going on in the bay area, we have been able to absorb that contraction in the tenants, which jk put on the front page today and managed to overwhelm that with growth in technology and technology-related tenants, which is why what is going on in the bay area today is so extraordinary relative to what is going on in the rest of
commercial real estate across the country. when we look at this, in practical terms, here is a prototypically way for a tenant in an office building. this layout allows people to reach a ratio of 110 square feet per person or over nine people per thousand square feet. this density, i think, is very important. it means a couple of things. first, it means that san francisco and other transit-rich locations will win over suburban greenfield sites, where projects are typically parked at three or 3.3 per thousand. because if you build this kind of density on market street, or you build it in san francisco, your employees can get there by bike, by muni, by bart. if you build this in north bay
shore, you can't get your employees there to build out this kind of density. we're very much seeing this on the peninsula, where the office buildings that are located close to the caltrain are really distancing themselves from the other buildings on the peninsula in the northern part of the valley that aren't near the train. because that access to transit is so incredibly important. the other thing that i would point out is that while you are putting these kind of densities into this space, this is not back off this space for bank of america circa 1975, where these people are making $15,000, $20,000 a year. most of these jobs are high-paying engineering jobs. so you are putting a lot of people with high payroll into a relatively limited amount of
space. and i think that that means that rent is less important. it's not irrelevant. but it's less important to these people and the willingness to pay rent to be in the right location and be able to retract and retain talent, being in the right location is critical. how much you pay in rent is less critical. and i think that sets the foundation where rates can go up . the key is having the right work environment, retaining people, the key is being in a cool environment. thankfully for all of us, particularly for the people sitting at table 3, san francisco is cool. it's diverse. it's progressive. it's dynamic.
it's hip. young, bright people want to live here. i'm going to date myself a little bit, but when i graduated from college, you know, the logic was that you went and found the best job that you possibly could, and if that job took you to cleveland or took you to newark, new jersey, you went and took that job. today if you graduate from college, you move to someplace that is cool and fun, and then you look to find the best job that you can. and that is extraordinarily important for san francisco. the fact that this is someplace that people want to live coming out of school, means that the employees are moving here.
this is not something that is lost on traditional silicon valley. silicon valley has figured out that people want to live in san francisco, and the solution, the short-term solution is the buss that we all see, that now start in marin county and pick people up at the presidio and into the city as they go down to oracle and google and adobe, and apple. all of these companies are running these buses to bring people that they want to hire and they want to retain down to their corporate headquarters in silicon valley. it's a tremendous change and i would postulate if you think about this for a moment, it's essentially like the suburban